UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2022

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

001-36312

(Commission File Number)

POWER REIT

(Exact name of registrant as specified in its charter)

Maryland		45-3116572
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

301 Winding Road, Old Bethpage, NY		11804
(Address of principal executive offices)		(Zip Code)

(212) 750-0371

(Registrant’s telephone number, including area code)

N/A

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Shares	PW	NYSE American

7.75% Series A Cumulative Redeemable Perpetual Preferred Stock, Liquidation Preference $25 per Share	PW.PRA	NYSE American

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☒	Smaller reporting company	☒
Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes ☐ No ☒

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

3,367,261 common shares, $0.001 par value, outstanding at May 9, 2022.

TABLE OF CONTENTS

		Page No.

PART I – FINANCIAL INFORMATION

Item 1 – Financial Statements (Unaudited)		3
	Consolidated Balance Sheets at March 31, 2022 and December 31, 2021	3
	Consolidated Statements of Operations for the three months ended March 31, 2022 and 2021	4
	Consolidated Statements of Changes in Shareholders’ Equity for the three months ended March 31, 2022 and 2021	5
	Consolidated Statements of Cash Flows for the three months ended March 31, 2022 and 2021	6
	Notes to Unaudited Consolidated Financial Statements	7

Item 2 – Management’s Discussion and Analysis of Financial Condition and Results of Operations		16

Item 3 – Quantitative and Qualitative Disclosures About Market Risk		21

Item 4 – Controls and Procedures		21

PART II – OTHER INFORMATION

	Item 1 – Legal Proceedings	21

	Item 1A – Risk Factors	22

	Item 2 – Unregistered Sales of Equity Securities and Use of Proceeds	25

	Item 3 – Defaults Upon Senior Securities	25

	Item 4 – Mine Safety Disclosures	25

	Item 5 – Other Information	25

	Item 6 – Exhibits	25

SIGNATURE		26

POWER REIT AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(Unaudited)

	March 31, 2022		December 31, 2021
ASSETS
Land	$	10,781,752	$	10,418,232
Greenhouse cultivation and processing facilities, net of accumulated depreciation		51,473,028		42,587,727
Greenhouse cultivation and processing facilities - construction in progress		19,332,749	$	13,318,883
Net investment in direct financing lease - railroad		9,150,000		9,150,000
Total real estate assets		90,737,529		75,474,842

Cash and cash equivalents		1,938,889		3,171,301
Accounts receivable		238,900		-
Prepaid expenses and deposits		47,795		493,196
Intangible lease asset, net of accumulated amortization		3,656,384		3,760,556
Deferred debt issuance cost, net of amortization		128,753		274,003
Deferred rent receivable		1,528,957		2,094,292
Other assets		-		50,000
TOTAL ASSETS	$	98,277,207	$	85,318,190

LIABILITIES AND EQUITY
Accounts payable	$	501,643	$	79,371
Accrued interest		77,100		76,600
Deferred rent liability		1,277,389		861,916
Tenant security deposits		2,420,206		2,612,206
Prepaid rent		155,286		37,161
Intangible lease liability, net of accumulated amortization		132,775		142,700
Current portion of long-term debt, net of unamortized discount		649,645		641,238
Long-term debt, net of unamortized discount		33,808,303		22,555,911
TOTAL LIABILITIES		39,022,347		27,007,103

Series A 7.75% Cumulative Redeemable Perpetual Preferred Stock Par Value $25.00 (1,675,000 shares authorized; 336,944 issued and outstanding as of March 31, 2022 and December 31, 2021)		8,489,952		8,489,952

Equity:
Common Shares, $0.001 par value (98,325,000 shares authorized; 3,367,261 shares issued and outstanding as of March 31, 2022 and 3,367,561 shares issued and outstanding as of December 31, 2021)		3,367		3,367
Additional paid-in capital		45,796,174		45,687,074
Retained earnings		4,965,367		4,130,694
Total Equity		50,764,908		49,821,135

TOTAL LIABILITIES AND EQUITY	$	98,277,207	$	85,318,190

The accompanying notes are an integral part of these unaudited consolidated financial statements.

POWER REIT AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

	2022			2021
	Three Months Ended March 31,
	2022			2021
REVENUE
Lease income from direct financing lease – railroad	$	228,750		$	228,750
Rental income		1,418,735			1,591,931
Rental income - related parties		338,016			-
Other income		15			246
TOTAL REVENUE		1,985,516			1,820,927

EXPENSES
Amortization of intangible assets		104,172			59,285
General and administrative		291,283			163,528
Property taxes		6,289			6,307
Depreciation expense		288,537			196,051
Interest expense		297,355			287,628
TOTAL EXPENSES		987,636			712,799

NET INCOME		997,880			1,108,128

Preferred Stock Dividends		(163,207	)		(163,210	)

NET INCOME ATTRIBUTABLE TO COMMON SHAREHOLDERS	$	834,673		$	944,918

Income Per Common Share:
Basic	$	0.25		$	0.34
Diluted	$	0.25			0.33

Weighted Average Number of Shares Outstanding:
Basic		3,367,531			2,755,502
Diluted		3,367,531			2,839,474

Cash dividend per Series A Preferred Share	$	0.48		$	0.48

The accompanying notes are an integral part of these unaudited consolidated financial statements.

POWER REIT AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY

For the Quarters Ended March 31, 2022 and 2021

(Unaudited)

	Shares			Amount		Capital		Deficit)			Equity
						Additional		Retained Earnings			Total
	Common Shares					Paid-in		(Accumulated			Shareholders’
	Shares			Amount		Capital		Deficit)			Equity

Balance at December 31, 2021		3,367,561		$	3,367	$	45,687,074	$	4,130,694		$	49,821,135
Net Income		-			-		-		997,880			997,880
Cash Dividends on Preferred Stock		-			-		-		(163,207	)		(163,207	)
Issuance of Common Shares for Cash
Issuance of Common Shares for Cash, shares
Stock-Based Compensation		(300	)		-		109,100		-			109,100
Balance at March 31, 2022		3,367,261		$	3,367	$	45,796,174	$	4,965,367		$	50,764,908

Balance at December 31, 2020		1,916,139		$	1,916	$	12,077,054	$	(360,962	)	$	11,718,008
Net Income		-			-		-		1,108,128			1,108,128
Cash Dividends on Preferred Stock		-			-		-		(163,210	)		(163,210	)
Issuance of Common Shares for Cash		1,383,394			1,383		36,596,672		-			36,598,055
Stock-Based Compensation		-			-		66,158		-			66,158
Balance at March 31, 2021		3,299,533		$	3,299	$	48,739,884	$	583,956		$	49,327,139

The accompanying notes are an integral part of these unaudited consolidated financial statements.

POWER REIT AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

	2022			2021
	Three Months Ended March 31,
	2022			2021
Operating activities
Net income	$	997,880		$	1,108,128

Adjustments to reconcile net income to net cash provided by operating activities:
Amortization of intangible lease asset		104,172			59,285
Amortization of debt costs		21,976			8,527
Amortization of below market lease		(9,925	)		-
Stock-based compensation		109,100			66,158
Depreciation		288,537			196,051

Changes in operating assets and liabilities
Accounts receivable		(238,900	)		-
Deferred rent receivable		565,335			(506,710	)
Deferred rent liability		415,473			110,785
Prepaid expenses and deposits		445,401			24,831
Other assets		50,000			-
Accounts payable		422,272			(9,048	)
Tenant security deposits		(192,000	)		100,001
Accrued interest		500			(3,111	)
Prepaid rent		118,125			49,955
Net cash provided by operating activities		3,097,946			1,204,852

Investing activities
Cash paid for land, greenhouse cultivation and processing facilities		(9,537,358	)		(4,752,241	)
Cash paid for greenhouse cultivation and processing facilities - construction in progress		(6,013,866	)		(1,352,516	)
Net cash used in investing activities		(15,551,224	)		(6,104,757	)

Financing Activities
Net proceeds from issuance of common stock for cash		-			36,598,055
Payment of debt issuance costs		(43,958	)		-
Proceeds from long-term debt		11,500,000			-
Principal payment on long-term debt		(71,969	)		(65,444	)
Cash dividends paid on preferred stock		(163,207	)		(163,210	)
Net cash provided by financing activities		11,220,866			36,369,401

Net decrease in cash and cash equivalents		(1,232,412	)		31,469,496

Cash and cash equivalents, beginning of period	$	3,171,301		$	5,601,826

Cash and cash equivalents, end of period	$	1,938,889		$	37,071,322

Supplemental disclosure of cash flow information:
Interest paid	$	275,879		$	282,212
Preferred stock issuance for purchase of greenhouse cultivation and processing facility	$	-		$	4,997,803
Reclass of deferred debt issuance costs to liability upon loan draw	$	175,759

The accompanying notes are an integral part of these unaudited consolidated financial statements.

Notes to Unaudited Consolidated Financial Statements

1 – GENERAL INFORMATION

The accompanying unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information, and with the rules and regulations of the Securities and Exchange Commission (“SEC”) regarding interim financial reporting. Accordingly, these interim financial statements do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of the Trust, as defined below, these unaudited consolidated financial statements include all adjustments necessary to present fairly the information set forth herein. All such adjustments are of a normal recurring nature. Results for interim periods are not necessarily indicative of results to be expected for a full year.

These unaudited consolidated financial statements should be read in conjunction with our audited consolidated financial statements and notes included in our latest Annual Report on Form 10-K filed with the SEC on March 31, 2022.

Power REIT (the “Registrant” or the “Trust”, and together with its consolidated subsidiaries, “we”, “us”, or “Power REIT”, unless the context requires otherwise) is a Maryland-domiciled, internally-managed real estate investment trust (a “REIT”) that owns a portfolio of real estate assets related to transportation, energy infrastructure and Controlled Environment Agriculture (“CEA”) in the United States.

Power REIT was formed as part of a reorganization and reverse triangular merger of P&WV that closed on December 2, 2011. P&WV survived the reorganization as a wholly-owned subsidiary of the Registrant.

The Trust is structured as a holding company and owns its assets through twenty-five direct and indirect wholly-owned, special purpose subsidiaries that have been formed in order to hold real estate assets, obtain financing and generate lease revenue. As of March 31, 2022, the Trust’s assets consisted of approximately 112 miles of railroad infrastructure and related real estate which is owned by its subsidiary Pittsburgh & West Virginia Railroad (“P&WV”), approximately 601 acres of fee simple land leased to a number of utility scale solar power generating projects with an aggregate generating capacity of approximately 108 Megawatts (“MW”) and approximately 263 acres of land with approximately 2,211,000 square feet of existing or under construction greenhouses.

On March 31, 2022, Power REIT acquired a 1,121,513 square foot CEA greenhouse in O’Neill Nebraska which is the Trust’s largest greenhouse to date and is the first acquisition with the focus on the cultivation of food crops.

During the three months ended March 31, 2022, the Trust paid quarterly dividends of approximately $163,000 ($0.484375 per share per quarter) on Power REIT’s 7.75% Series A Cumulative Redeemable Perpetual Preferred Stock.

The Trust has elected to be treated for tax purposes as a REIT, which means that it is exempt from U.S. federal income tax if a sufficient portion of its annual income is distributed to its shareholders, and if certain other requirements are met. In order for the Trust to maintain its REIT qualification, at least 90% of its ordinary taxable annual income must be distributed to shareholders. As of December 31, 2020, the last tax return completed to date, the Trust has a net operating loss of $22.7 million, which may reduce or eliminate this requirement.

2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

These unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”).

Principles of Consolidation

The accompanying consolidated financial statements include Power REIT and its wholly-owned subsidiaries. All intercompany balances have been eliminated in consolidation.

Income per Common Share

Basic net income per common share is computed by dividing net income available to common stockholders by the weighted average number of common shares outstanding. Diluted net income per common share is computed similar to basic net income per common share except that the denominator is increased to include the number of additional common shares that would have been outstanding if the potential common shares had been issued and if the additional common shares were dilutive. The dilutive effect of the Trust’s options is computed using the treasury stock method.

The following table sets forth the computation of basic and diluted Income per Share:

	2022			2021
	Three Months Ended
	March 31,
	2022			2021

Numerator:
Net Income	$	997,880		$	1,108,128
Preferred Stock Dividends		(163,207	)		(163,210	)
Numerator for basic and diluted EPS - income available to common Shareholders	$	834,673		$	944,918

Denominator:
Denominator for basic EPS - Weighted average shares		3,367,531			2,755,502
Dilutive effect of options		-			83,972
Denominator for diluted EPS - Adjusted weighted average shares		3,367,531			2,839,474

Basic income per common share	$	0.25		$	0.34
Diluted income per common share	$	0.25		$	0.33

Real Estate Assets and Depreciation of Investment in Real Estate

The Trust expects that most of its transactions will be accounted for as asset acquisitions. In an asset acquisition, the Trust is required to capitalize closing costs and allocates the purchase price on a relative fair value basis. For the three months ended March 31, 2022, and 2021, all acquisitions were considered asset acquisitions. In making estimates of relative fair values for purposes of allocating purchase price, the Trust utilizes a number of sources, including independent appraisals that may be obtained in connection with the acquisition or financing of the respective property, its own analysis of recently acquired and existing comparable properties in our portfolio and other market data. The Trust also considers information obtained about each property as a result of its pre-acquisition due diligence, marketing and leasing activities in estimating the relative fair value of the tangible acquired. The Trust allocates the purchase price of acquired real estate to various components as follows:

	●	Land – Based on actual purchase if acquired as raw land. When property is acquired with improvements, the land price is established based on market comparables and market research to establish a value with the balance allocated to improvements for the land.

	●	Improvements – When a property is acquired with improvements, the land price is established based on market comparables and market research to establish a value with the balance allocated to improvements for the land. The Trust also evaluate the improvements in terms of replacement cost and condition to confirm that the valuation assigned to improvements is reasonable. Depreciation is calculated on a straight-line method over the useful life of the improvements.

●

Lease Intangibles – The Trust recognizes lease intangibles when there’s an existing lease assumed with the property acquisitions. In determining the fair value of in-place leases (the avoided cost associated with existing in-place leases) management considers current market conditions and costs to execute similar leases in arriving at an estimate of the carrying costs during the expected lease-up period from vacant to existing occupancy. In estimating carrying costs, management includes reimbursable (based on market lease terms) real estate taxes, insurance, other operating expenses, as well as estimates of lost market rental revenue during the expected lease-up periods. The values assigned to in-place leases are amortized over the remaining term of the lease.

The fair value of above-or-below market leases is estimated based on the present value (using an interest rate which reflected the risks associated with the leases acquired) of the difference between contractual amounts to be received pursuant to the leases and management’s estimate of market lease rates measured over a period equal to the estimated remaining term of the lease. An above market lease is classified as an intangible asset and a below market lease is classified as an intangible liability. The capitalized above-market or below-market lease intangibles are amortized as a reduction of, or an addition to, rental income over the estimated remaining term of the respective leases.

Intangible assets related to leasing costs consist of leasing commissions and legal fees. Leasing commissions are estimated by multiplying the remaining contract rent associated with each lease by a market leasing commission. Legal fees represent legal costs associated with writing, reviewing, and sometimes negotiating various lease terms. Leasing costs are amortized over the remaining useful life of the respective leases.

●

Construction in Progress (CIP) - The Trust classifies greenhouses or buildings under development and/or expansion as construction-in-progress until construction has been completed and certificates of occupancy permits have been obtained upon which the asset is then classified as an Improvement. The value of CIP is based on actual costs incurred.

Depreciation

Depreciation is computed using the straight-line method over the estimated useful lives of 20 years for greenhouses and 39 years for auxiliary buildings, except for Candescent, which was determined the buildings have a useful life of 37 years. The Trust recorded an increase in depreciation expense for the three months ended March 31, 2022 related to depreciation on properties that it acquired and the placement into service of tenant improvements at our properties. For each of the three months ended March 31, 2022, and 2021, approximately $288,500 and $196,100 depreciation expense was recorded, respectively.

Covid – 19 Impact

We are monitoring Covid-19 closely. Our operations have been affected by the COVID-19 outbreak due to manufacturing and supply chain disruptions for materials which also may be experiencing delays related to transportation of such materials which is impacting construction timeframes. The ultimate severity of the outbreak and its impact on the economic environment is uncertain at this time.

Revenue Recognition

The Railroad Lease is treated as a direct financing lease. As such, income to P&WV under the Railroad Lease is recognized when received.

Lease revenue from solar land and CEA properties are accounted for as operating leases. Any such leases with rent escalation provisions are recorded on a straight-line basis when the amount of escalation in lease payments is known at the time Power REIT enters into the lease agreement, or known at the time Power REIT assumes an existing lease agreement as part of an acquisition (e.g., an annual fixed percentage escalation) over the initial lease term, subject to a collectability assessment, with the difference between the contractual rent receipts and the straight-line amounts recorded as “deferred rent receivable” or “deferred rent liability”. Collectability is assessed at quarter-end for each tenant receivable using various criteria including past collection issues, the current economic and business environment affecting the tenant and guarantees. If collectability of the contractual rent stream is not deemed probable, revenue will only be recognized upon receipt of cash from the tenant. During the three months ended March 31, 2022 and 2021, the Trust wrote off approximately $218,000 and $0, respectively in straight-line rent receivable against rental income based on its current assessment of collecting all remaining contractual rent on two CEA leases. Expenses for which tenants are contractually obligated to pay, such as maintenance, property taxes and insurance expenses are not reflected in the Trust’s consolidated financial statements.

Lease revenue from land that is subject to an operating lease without rent escalation provisions is recorded on a straight-line basis.

Intangibles

A portion of the acquisition price of the assets acquired by PW Tulare Solar, LLC (“PWTS”) have been allocated on the Trust’s consolidated balance sheets between Land and Intangibles’ fair values at the date of acquisition. The total amount of in-place lease intangible assets established was approximately $237,000, which will be amortized over a 24.6-year period. For each of the three months ended March 31, 2022 and 2021, approximately $2,400 of the intangibles was amortized.

A portion of the acquisition price of the assets acquired by PW Regulus Solar, LLC (“PWRS”) have been allocated on The Trust’s consolidated balance sheets between Land and Intangibles’ fair values at the date of acquisition. The total amount of in-place lease intangible assets established was approximately $4,714,000, which is amortized over a 20.7-year period. For each of the three months ended March 31, 2022 and 2021, approximately $56,900 of the intangibles was amortized.

A portion of the acquisition price of the assets acquired by PW CA Canndescent, LLC (“PW Canndescent”) have been allocated on The Trust’s consolidated balance sheets between Land, Improvements and Intangibles’ fair values at the date of acquisition. The amount of in-place lease intangible assets established was approximately $808,000, which is amortized over a 4.5-year period. For the three months ended March 31, 2022 and 2021, approximately $44,900 and $0 of amortization expense was recognized. A below-market lease intangible liability was recorded upon acquisition in the amount of approximately $179,000 and is amortized over a 4.5-year period. Addition to revenue for the amortization of the liability in the amount of approximately $9,900 and $0 was recognized for the three months ended March 31, 2022, and 2021, respectively.

Intangible assets are evaluated whenever events or circumstances indicate the carrying value of these assets may not be recoverable. There were no impairment charges recorded for the three months ended March 31, 2022, and 2021.

The following table provides a summary of the Intangible Assets and Liabilities:

SCHEDULE OF INTANGIBLE ASSETS

	For the Three Months Ended March 31, 2022
				Accumulated			Accumulated
				Amortization / Addition to Revenue			Amortization / Addition to Revenue			Net Book
	Cost			Through 12/31/21			1/1/22 - 3/31/22			Value
Asset Intangibles - PWTS	$	237,471		$	81,695		$	2,413		$	153,363
Asset Intangibles - PWRS	$	4,713,548		$	1,754,151		$	56,872		$	2,902,525
Asset Intangibles - Canndescent	$	807,976		$	162,593		$	44,887		$	600,496
Asset Intangibles Total	$	5,758,995		$	1,998,439		$	104,172		$	3,656,384

Liability Intangible - Canndescent	$	(178,651	)	$	(35,951	)	$	(9,925	)	$	(132,775	)

The following table provides a summary of the current estimate of future amortization of Intangible Assets for the subsequent years ended December 31:


2022 (9 months remaining)	$	312,518
2023		416,690
2024		416,690
2025		343,874
2026		237,141
Thereafter		1,929,471
Total	$	3,656,384

The following table provides a summary of the current estimate of future addition to revenue for Intangible Liability for the subsequent years ended December 31:


2022 (9 months remaining)	$	29,775
2023		39,700
2024		39,700
2025		23,600
Total	$	132,775

Net Investment in Direct Financing Lease – Railroad

P&WV’s net investment in its leased railroad property, recognizing the lessee’s perpetual renewal options, was estimated to have a current value of $9,150,000, assuming an implicit interest rate of 10%.

Fair Value

Fair value represents the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. The Trust measures its financial assets and liabilities in three levels, based on the markets in which the assets and liabilities are traded and the reliability of the assumptions used to determine fair value.

	○	Level 1 – valuations for assets and liabilities traded in active exchange markets, or interest in open-end mutual funds that allow a company to sell its ownership interest back at net asset value on a daily basis. Valuations are obtained from readily available pricing sources for market transactions involving identical assets, liabilities or funds.

	○	Level 2 – valuations for assets and liabilities traded in less active dealer, or broker markets, such as quoted prices for similar assets or liabilities or quoted prices in markets that are not active. Level 2 includes U.S. Treasury, U.S. government and agency debt securities, and certain corporate obligations. Valuations are usually obtained from third party pricing services for identical or comparable assets or liabilities.

	○	Level 3 – valuations for assets and liabilities that are derived from other valuation methodologies, such as option pricing models, discounted cash flow models and similar techniques, and not based on market exchange, dealer, or broker traded transactions. Level 3 valuations incorporate certain assumptions and projections in determining the fair value assigned to such assets or liabilities.

In determining fair value, the Trust utilizes valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs to the extent possible as well as considering counterparty credit risk.

The carrying amounts of Power REIT’s financial instruments, including cash and cash equivalents, prepaid expenses, and accounts payable approximate fair value because of their relatively short-term maturities. The carrying value of long-term debt approximates fair value since the related rates of interest approximate current market rates. There are no financial assets and liabilities carried at fair value on a recurring basis as of March 31, 2022 and December 31, 2021.

3 – ACQUISITIONS

2022 Acquisitions

On March 31, 2022, Power REIT, through a newly formed wholly owned subsidiary, PW MillPro NE LLC, (“PW MillPro”), acquired a 1,121,513 square foot greenhouse cultivation facility (the “MillPro Facility”) on an approximately 86 acre property and a separate approximately 4.88 acre property with a 21-room employee housing building (the “Housing Facility”) for $9,350,000 and closing costs of approximately $88,000 located in O’Neill, Nebraska. As part of the transaction, the Trust agreed to fund improvements including the replacement of Energy Curtains for $534,430.

The following table summarizes the preliminary allocation of the purchase consideration for the PW MillPro properties based on the relative fair values of the assets acquired:

	Greenhouse		Housing Facility
Land	$	344,000	$	19,520
Assets subject to depreciation:
Improvements (Greenhouses / Processing Facilities)		8,790,790		283,399

Total Assets Acquired	$	9,134,790	$	302,919

4– DIRECT FINANCING LEASES AND OPERATING LEASES

Information as Lessor Under ASC Topic 842

To generate positive cash flow, as a lessor, the Trust leases its facilities to tenants in exchange for payments. The Trust’s leases for its railroad, solar farms and greenhouse cultivation facilities have lease terms ranging between 5 and 99 years. Payments from the Trust’s leases are recognized on a straight-line basis over the terms of the respective leases when deemed probable of collection. Collectability is assessed at quarter-end for each tenant receivable using various criteria including past collection issues, the current economic and business environment affecting the tenant and guarantees. If collectability of the contractual rent stream is not deemed probable, revenue will only be recognized upon receipt of cash from the tenant. Total revenue from its leases recognized for the three months ended March 31, 2022 and March 31, 2021 is approximately $1,986,000 and 1,821,000, respectively.

During the three months ended March 31, 2022 and 2021, the Trust wrote off approximately $218,000 and $0, respectively in straight-line rent receivable against rental income based on its current assessment of collecting all remaining contractual rent on two greenhouse property leases located in Ordway, CO.

Historically, the Trust’s revenue has been concentrated to a relatively limited number of investments, industries and lessees. As the Trust grows, its portfolio may remain concentrated in a limited number of investments. During the three months ended March 31, 2022, Power REIT collected approximately 66% of its consolidated revenue from five properties. The tenants are NorthEast Kind Assets, LLC (“Sweet Dirt”), Fiore Management LLC (“Canndescent”), Norfolk Southern Railway, Walsenburg Cannabis LLC and Regulus Solar, LLC which represent 19%, 14%, 12%, 11% and 10% of consolidated revenue respectively. Comparatively, during the three months ended March 31, 2021, Power REIT collected approximately 42% of its consolidated revenue from three properties. The tenants were NorthEast Kind Assets, LLC (“Sweet Dirt”), Norfolk Southern Railway and Regulus Solar, LLC which represent 18%, 13% and 11% of consolidated revenue respectively.

The aggregate annual cash expected to be received by the Trust on all leases related to its portfolio as of March 31, 2022, is as follows for the subsequent years ended December 31:

SCHEDULE OF MINIMUM FUTURE RENTALS


2022 (9 Months Remaining)	$	9,990,788
2023	$	14,829,847
2024	$	12,356,471
2025	$	9,458,281
2026	$	7,635,715
Thereafter	$	125,653,047
Total	$	179,924,149

5 – LONG-TERM DEBT

On December 31, 2012, as part of the Salisbury land acquisition, PW Salisbury Solar, LLC (“PWSS”) assumed existing municipal financing (“Municipal Debt”). The Municipal Debt has approximately 10 years remaining. The Municipal Debt has a simple interest rate of 5.0% that is paid annually, due on February 1 of each year. The balance of the Municipal Debt as of March 31, 2022 and December 31, 2021 is approximately $58,000 and $64,000 respectively.

In July 2013, PWSS borrowed $750,000 from a regional bank (the “PWSS Term Loan”). The PWSS Term Loan carries a fixed interest rate of 5.0% for a term of 10 years and amortizes based on a 20-year principal amortization schedule. The loan is secured by PWSS’ real estate assets and a parent guarantee from the Trust. The balance of the PWSS Term Loan as of March 31, 2022 and December 31, 2021 is approximately $514,000 (net of approximately $3,400 of capitalized debt costs which are being amortized over the life of the financing) and $521,000 (net of approximately $4,100 of capitalized debt costs which are being amortized over the life of the financing), respectively.

On November 6, 2015, PWRS entered into a loan agreement (the “2015 PWRS Loan Agreement”) with a certain lender for $10,150,000 (the “2015 PWRS Loan”). The 2015 PWRS Loan is secured by land and intangibles owned by PWRS. PWRS issued a note to the benefit of the lender dated November 6, 2015 with a maturity date of October 14, 2034 and a 4.34% interest rate. As of March 31, 2022 and December 31, 2021, the balance of the PWRS Bonds was approximately $7,801,000 (net of unamortized debt costs of approximately $275,000) and $7,803,000 (net of unamortized debt costs of approximately $280,000), respectively.

On November 25, 2019, Power REIT, through a newly formed subsidiary, PW PWV Holdings LLC (“PW PWV”), entered into a loan agreement (the “PW PWV Loan Agreement”) with a certain lender for $15,500,000 (the “PW PWV Loan”). The PW PWV Loan is secured by pledge of PW PWV’s equity interest in P&WV, its interest in the Railroad Lease and a security interest in a deposit account (the “Deposit Account”) pursuant to a Deposit Account Control Agreement dated November 25, 2019 into which the P&WV rental proceeds is deposited. Pursuant to the Deposit Account Control Agreement, P&WV has instructed its bank to transfer all monies deposited in the Deposit Account to the escrow agent as a dividend/distribution payment pursuant to the terms of the PW PWV Loan Agreement. The PW PWV Loan is evidenced by a note issued by PW PWV to the benefit of the lender for $15,500,000, with a fixed interest rate of 4.62% and fully amortizes over the life of the financing which matures in 2054 (35 years). The balance of the loan as of March 31, 2022 and December 31, 2021 is $14,761,000 (net of approximately $291,000 of capitalized debt costs) and $14,809,000 (net of approximately $293,000 of capitalized debt costs).

On December 21, 2021, Power REIT entered into a Debt Facility with initial availability of $20 million. The facility is non-recourse to Power REIT and is structured without initial collateral but has springing liens to provide security against a significant number of Power REIT CEA portfolio properties in the event of default. The Debt Facility has a 12 month draw period and then converts to a term loan that is fully amortizing over five years. The interest rate on the Debt Facility is 5.52% and throughout the term of the loan, a debt service coverage ratio of equal to or greater than 2.00 to 1.00 must be maintained. Power REIT is in compliance with the debt service ratio as of March 31, 2022. Debt issuance expenses of approximately $275,000 and $44,000 have been capitalized during the year ended December 31, 2021 and during the three months ended March 31, 2022 respectively. Amortization of approximately $13,400 has been recognized for the three months ended March 31, 2022 and approximately $176,000 deferred debt issuance costs were re-classed as contra liability upon the loan draw. During the three months March 31, 2022, $11,500,000 was drawn on the Debt Facility.

The approximate amount of principal payments remaining on Power REIT’s long-term debt as of March 31, 2022 is as follows:

SCHEDULE OF LONG-TERM DEBT

	Total Debt

2022 (9 months remaining)		603,302
2023		2,893,824
2024		3,015,777
2025		3,055,634
2026		3,097,628
Thereafter		22,536,946
Long term debt	$

SEC Form 10-Q filed by Power REIT (MD)